Understanding the Cost of Living Adjustment after Duncan
The Duncan v. WCAB (XYZZX) decision of the Sixth District Court of Appeal (filed on 11/25/09 and certified for publication) holds that the cost of living adjustments (COLA) of Labor Code §4659(c) to life pension and permanent total disability cases start January 1, 2004 and every January thereafter for injuries occurring on or after January 1, 2003.
In the Duncan case, Applicant (identified as XYZZX) sustained an industrial injury on 01/20/04 which resulted in permanent disability (PD) of 69.5% to which the parties stipulated. Applicant then filed a claim with the Subsequent Injuries Benefit Trust Fund (SIBTF) due to pre-existing disability due to hepatitis and HIV with applicant and the SIBTF stipulating to permanent total disability (PTD) as a result of both the industrial injury and the pre-existing non-industrial conditions. Benefits started on 10/20/06 with a dispute arising as to when the payment was to increase because of changes in the state average weekly wage (SAWW).
Per Finding and Award, the Workers’ Compensation Judge (WCJ) found that payment should increase on the January 1st following the date of injury with the Workers’ Compensation Appeals Board (on reconsideration) holding that the increase would not apply until the January 1st following permanent and stationary (P&S) status.
The SIBTF petitioned for Writ of Review arguing that benefit payments should be increased when the injured worker becomes entitled. Applicant argued in support of the WCJ that benefits should be increased on the January 1st following the date of injury.
After reviewing the legislative history, the Court rejected both arguments holding that the plain language of the statute required application of the COLA adjustment on January 1, 2004 and every January thereafter reasoning that the injured worker became “entitled” to “that payment” on January 1, 2004 and every January thereafter irrespective of the date of injury or P&S date to prevent the benefit from being eroded by the “ravages of inflation.”
From a defense perspective, the decision flies in the face of when a permanent disability award accrues which is when an injured worker becomes P&S; or, in the case of a life pension, after the PD award ends. In circumventing these questions, the Court construed the word “payment” as when the payment is “set” rather than when the actual payment is due.
Increases in the SAWW are not limited to Labor Code § 4659(c) but are also contemplated in Labor Code § 4453(a)(10). Labor Code § 4453(a)(10) dictates that COLA increases are applied to the minimum and maximum limits for temporary total disability (TTD) and PTD starting on January 1, 2007 and on every January 1 thereafter. Labor Code § 4659(c) directs that the actual payments of life pension and PTD benefits shall be “increased annually commencing on January 1, 2004, and each January 1 thereafter.” Labor Code § 4702(b) states that death benefits “shall be paid in installments in the same manner and amounts as temporary total disability indemnity.” Therefore, COLA adjustments are applied to TTD maximum and minimum limits, death benefits, life pension payments and PTD maximum and minimum limits.
The question, then, is whether Duncan applies to all benefits adjusted by the SAWW.
Duncan only applies to benefits that have their payments adjusted per LC 4659(c) – i.e., permanent total disability and life pension. Moreover, life pension and PTD benefits are not calculated in the same manner since life pension benefits are only affected by LC § 4659(c) whereas PTD benefits are affected by both LC § 4659(c) as well as LC § 4453(a)(10).
On a slightly positive note, the benefits do not go up indefinitely since the injured workers’ own average weekly wage may be a ceiling and not support additional increases once it has been reached (although there is not unanimity in the community for this position).
SAWW increases can be determined by comparing California’s SAWW as compiled by the Department of Labor. Since 2004, they are: 2004: no increase from 2003; 2005: 1.97470%; 2006: 4.00814%; 2007: 4.95933%; 2008: 3.93182%; 2009: 4.54844%; 2010: 2.99414%.