The en banc case of Ashley Colamonico v. Secure Transportation outlines the framework for reimbursement of med-legal expenses. In Colamonico, the WCJ issued Findings and Orders which found that the defendant waived all objections to unpaid portions of a photocopy service’s billings. On reconsideration, the matter was rescinded and returned to the trial level for further proceedings.

The Court, en banc, held that a medical legal provider has the initial burden of proof that it complied with Labor Code §4620 and §4621. In it’s discussion, the Court noted that Labor Code §4622 provides the framework for reimbursement of medical legal expenses, but that subsection (f) of that particular statute specifically states that the section is not applicable unless there has been compliance with Labor Code §4620 and §4621.

Labor Code §4620(a) defines a med-legal expense as a cost or expense that a party incurs for the purpose of proving or disproving a contested claim. The Court noted that copy service fees are considered a medical legal expense under Labor Code §4620(a).

The lien claimant’s initial burden in proving entitlement to reimbursement for a medical legal expense is to show that the contested claim existed at the time the service was performed. Per Labor Code §4620(b), there is a contested claim when the employer knows or reasonably should know of an employee’s claim for workers’ compensation benefits and the employer denies the employee’s claim outright or fails to act within a reasonable time regarding the claim.

Once the lien claimant has met it’s burden of proof pursuant to Labor Code §4620(a), it’s second hurdle to overcome is that the purported medical legal expense must be reasonably, actually, and necessarily incurred. Citing Labor Code §4621(a), the Court found that the determination of reasonableness or necessity of a service is based upon the time period in which the service was actually performed.

The Court summarized the lien claimant’s burden necessary to establish entitlement for payment to include: 1) A contested claim existed at the time the expenses were incurred; 2) The expenses were incurred for the purpose of proving or disproving the contested claim; and 3) The expenses were reasonable and necessary at the time they were incurred. (Citing Labor Code §4620, §4621 and §4622(f).)

Once a lien claimant has established the three elements noted above, it then may proceed to address the reasonable value of it’s service under Labor Code §4622.

The Court further explained that a defendant does not waive an objection based on Labor Code §4620 or §4621 by failing to raise those objections in an explanation of review in accordance with Labor Code §4622. Labor Code §4622(f) explicitly states that this section is not applicable unless there has been compliance with Labor Code §§4620 and 4621. In rescinding and returning the case to the trial level, the Court noted the history of these provisions “render it crystal clear that an applicant could not seek medical legal evaluations for which the employer/carrier would be financially responsible before the employer had received notice of the industrial claim and had the opportunity to respond to it.”

The Court concluded that the WCJ’s analysis was inconsistent with Labor Code §4622(f) as well as Title 8 of the California Code of Regulations §10451.1(f)(1)(A), which states that a defendant shall be deemed to have finally waived all objections to a medical legal provider’s billing “other than compliance with Labor Code §§4620 and 4621” for failure to respond to a provider’s billing as required. (Emphasis added.) In short, the Court found that the defendant did not waive it’s objections based on Labor Code §§4620 or 4621 for failing to raise these objections in an explanation of review.

The Court also addressed the case of Otis v. City of Los Angeles 45 CCC 1132 (1980) which is often cited by medical legal providers. The Court noted that Otis was decided in 1980 and the language relied upon under former §4601.5 stated that all fees and expenses for medical legal costs shall be paid unless the bill is contested within 60 days. However, the Court noted in 1984, subsequent to the issuance of the Otis case, Labor Code §4622(a) was enacted and former §4601.5 was repealed. The Court further noted that under later amendments to Labor Code §4622, the legislature explicitly shifted the burden from the employer to the provider and noted that the burden was no longer on the defendant to object to the reasonableness or necessity of the provider’s services. Instead, the initial burden was on the provider to show it’s services were reasonable and necessary. The Court concluded that the holding in Otis was inconsistent with Labor Code §4622 and rejected the application of it’s holding in Otis with respect to the statutory framework of Labor Code §4620, §4621 or Labor Code §4622.

Finally, the Court did warn defendants that a late challenge to the reasonableness and/or necessity of a medical legal expense for the first time at a Lien Conference could expose itself to penalties and interest. The court also has discretion to consider whether the defendant is engaging in bad faith tactics to delay the resolution of the lien. This is potentially a basis for sanctions under Labor Code §5813. So while a lien claimant has the initial burden of proof that it complied with Labor Codes 4620 and 4621, a defendant would be wise to assert all objections as early in the process as possible.