1 WORKERS' COMPENSATION APPEALS BOARD. 4 Case No. ADJ (ANA )

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1 1 WORKERS' COMPENSATION APPEALS BOARD 2 STATE OF CALIFORNIA 3 4 Case No. ADJ (ANA ) LONNIE SHELTON, 5 OPINION AND ORDER 6 Applicant, GRANTING RECONSIDERATION AND DECISION AFTER 7 vs. RECONSIDERATION 8 CALVALIERS HOLDINGS COMPANY, 9 LLC, DBA CLEVELAND CAVALIERS; OHIO BUREAU OF WORKERS 1 COMPENSATION, Defendants. 13 Defendant, Ohio Bureau of Workers' Compensation (OBWC), appearing specially to 14 contest personal jurisdiction, seeks reconsideration of the Findings and Award and Order, issued 15 August 8, 2008, in which a workers' compensation administrative law judge (WCJ) found 16 applicant, Lonnie Shelton, while employed as a professional basketball player by the Cleveland 17 Cavaliers over the period June 1983 to 1986, sustained an industrial cumulative trauma injury to 18 his low back, bilateral knees and ankles, his left wrist, right elbow and little finger of the left hand, 19 resulting in 86.75% permanent disability and need for further medical treatment. The WCJ found 20 defendant, OBWC, admitted to providing workers' compensation coverage to applicant's 21 employer. The Award of permanent disability and further medical treatment was made against the 2211 employer and OBWC, and the WCJ found California has personal jurisdiction over the OBWC. 2 3 i OBWC contends the WCJ erred in finding it liable for the applicant's workers' 2 4ý compensation benefits, arguing the WCJ did not provide adequate grounds for concluding the 2 5ý WCAB could exercise personal jurisdiction, and further that it has been denied due process of law, 2 as the evidence submitted does not establish such jurisdiction over OBWC. OBWC argues that it 2 7 cannot be held liable for an award of workers' compensation benefits made in California, in that its

2 1 statutory coverage of Ohio employers precludes liability for awards made outside Ohio, and it has 2 not entered the California insurance market such that it could be expected to defend against a claim 3 for workers' compensation benefits in California. 4 As OBWC is not an insurer authorized to write compensation insurance in California, and 5 contests the Appeals Board's jurisdiction over it, the employer has failed to meet its obligation to 6 secure the payment of compensation under Labor Code section 3700, and therefore, the WCJ 7 should not have found OBWC to be jointly liable for the payment of applicant's compensation 8 award. Accordingly, we shall grant reconsideration to amend the Findings and Award and Order to 9 remove the OBWC as a party defendant. 201 Background 11 Applicant, Lonnie Shelton, began playing professional basketball in 1976, when he played 12 for the New York Knicks. He subsequently was traded to the Seattle Supersonics in 1978, and then 13 to the Cleveland Cavaliers in His professional basketball career ended in Due to the 14 rigors of the sport, applicant sustained injury from repetitive trauma to multiple parts of his body. 15 The medical record fully documents the extent of applicant's injuries, and no party has disputed the 16' WCJ's determination of applicant's permanent disability or need for further medical treatment. 17 The Cleveland Cavaliers have obtained compulsory workers' compensation insurance from 181 OBWC, the only workers' compensation insurer in Ohio. 19 The matter came on for hearing on July 2, 2008, at which time counsel for OBWC specially 20, appeared to contest insurance coverage, arguing that it "acknowledges coverage for a claim of 21 injury outside of the state of Ohio as long as the claim is brought in the state of Ohio pursuant to 22 the Ohio Workers' Compensation Act." 23 Defendant offered the testimony of Michael Glass, the director of underwriting for OBWC. 24 He testified that OBWC is a state run agency which does not market or solicit insurance business 251 outside the State of Ohio. He further testified that OBWC is not authorized to conduct business 2 6 outside the state. All Ohio employers must obtain workers' compensation insurance from OBWC 27 or be self-insured. Employers do not receive a paper insurance policy, as the terms of the policy are SHELTON, Lonnie 2

3 1 contained in the Ohio Workers' Compensation Act. OBWC does not offer insurance coverage for 2 claims adjudicated, or awards made, outside the State of Ohio. OBWC will adjudicate and pay 3 claims for injuries that occur outside the state by employees of Ohio employers. 4 The WCJ questioned Mr. Glass on the equities of the issue of Ohio's lack of insurance 5 coverage for out-of-state adjudication of covered injuries, stating: 6 "Now the situation where the person is injured out of the state and wishes to adjudicate it for some reason outside of Ohio, and now even though the employer has paid this premium, it appears they're 8 going to be illegally uninsured because there has been a denial of coverage." 9 In discussing this issue, Mr. Glass noted that the premium rates paid by Ohio employers are 10 set based upon historical data of benefits paid under Ohio law. Therefore, the premium rates would 11 not reflect any benefits awarded outside of Ohio. 12 OBWC also offered the testimony of Gerald Waterman, Principal Assistant Attorney 13 General for the State of Ohio, who has worked as an attorney for Ohio's workers' compensation 14 system for over 33 years. Mr. Waterman testified that under Ohio law, the OBWC is not authorized 15 to pay, and will not pay, a workers' compensation award issued by another workers' compensation 17ý agency in another state, even if the employer is insured by OBWC. He testified that the OBWC acts in accordance with its statutory authority, which limits it to only provide benefits in 18 accordance with Ohio law. 19 Mr. Waterman reviewed a recent legal decision from the Ohio Court of Appeals' which 2 held that OBWC was not responsible to reimburse an Ohio employer for temporary disability 21 benefits awarded in Pennsylvania for injuries sustained in Pennsylvania. He testified that the 22 OBWC does not have statutory authority to pay an award issued by any other jurisdiction other than the OBWC. 24 Discussion 25 Defendant OBWC contends the WCJ erred in finding it jointly liable for applicant's 26, 27 1 State of Ohio ex.rel. Kilbarger Construction v. Industrial Comm. Of Ohio (2007) 2007 Ohio SHELTON, Lonnie 3

4 1 workers' compensation benefits, arguing that the Workers' Compensation Appeals Board lacks 2 personal jurisdiction over OBWC because it does not have the requisite minimum contacts with the 3 State of California sufficient to justify the exercise of personal jurisdiction. 4 We believe the decision in this matter does not turn on the issue of personal jurisdiction 5 over an out-of-state insurer, though we do not dispute OBWC's assertion of an absence of 6 jurisdiction. Rather, under the facts presented here, the issue is whether the WCJ properly found 7 OBWC to be liable to applicant as the insurer of the Cleveland Cavaliers. It appears from this 8 record that OBWC is not authoriz.ed to write workers' compensation insurance for employers 9 doing business in this state. Thus, the Cleveland Cavaliers have failed to comply with the 10 requirement in Labor Code section 3700, that it secure the payment of compensation by obtaining a 11 workers' compensation policy from an insurer "duly authorized to write compensation insurance in 12 this state." 13 There is no dispute that California has subject matter jurisdiction over the applicant's 14 claims. In Washington Wizards v. Workers' Comp. Appeals Bd. (Roundfield) 71 Cal.Comp.Cases 1j 897 (writ den.), a panel of the Appeals Board held that the WCAB had subject matter jurisdiction 16 under Labor Code sections 5300 and 5301 over the claim of a professional basketball player for 17 injuries sustained during 1975 through 4/29/87, when part of his cumulative trauma was sustained 1i while playing basketball in California and he earned wages and paid taxes in California. The panel 19 also concluded that the WCAB had personal jurisdiction over applicant and his employer, 20[ Washington Wizards, when a portion of his cumulative trauma was sustained while he played for 21 Wizards in California. It should be noted that the defendant's petition for review was denied 22 because it was untimely filed, and the court did not address the merits of the jurisdictional 23 challenge. However, jurisdiction has been found in other cases involving a claim by a professional 241 athlete that cumulative trauma injury was incurred in part while playing in California. Another 25 panel reached the same conclusion in a case involving a professional football player. (Crosby v. 26 Buffalo Bills (ANA , June 23, 2000) 29 CWCR 182.) 27 Assuming that the WCAB has jurisdiction over the claims, the employer has responsibility SHELTON, Lonnie 4

5 1 to assure that insurance coverage is available to provide compensation in the event of industrial 2 injury. This is established by section 3700 which provides in pertinent part: 3 "Every employer except the state shall secure the payment of 4 compensation in one or more of the following ways: 5 "(a) By being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in 6 this state. 7 "(b) By securing from the Director of Industrial Relations a certificate of consent to self-insure either as an individual employer, 8 or as one employer in a group of employers, which may be given upon furnishing proof satisfactory to the Director of Industrial Relations of ability to self-insure and to pay any compensation that 101 may become due to his or her employees." (Emphasis added.) The testimony of Mr. Waterman and Mr. Glass is evidence that OBWC does not write 12ý workers' compensation insurance which complies with the requirements of Section Mr. 13 Glass testified that OBWC does not solicit business outside Ohio and is not authorized to conduct 14 business outside the state. Mr. Waterman testified that OBWC is statutorily prohibited from paying 15 1 workers' compensation awards issued against its insured employers by workers' compensation 16ýi agencies in other states. The holding in the case he discussed, Kilbarger, is consistent with 17 testimony. 18 In Kilbarger, an Ohio employer, insured by OBWC, was denied reimbursement for 19 temporary disability benefits it paid pursuant to an award of the Pennsylvania Bureau of Workers' 201 Compensation. The OBWC had paid some benefits to an employee injured in Pennsylvania, but 21] denied liability for the period awarded by the Pennsylvania Bureau of Workers' Compensation. In 22 23: its concluding statement, the court noted the absence of OBWC liability for awards made against an insured employer by another jurisdiction. "Clearly, neither the Ohio Constitution nor the statutes cited by relator [appellant] require or authorize the bureau [OBWC] or the commission to save relator harmless against claims that might be recognized by another state jurisdiction." Thus, it appears that the employer in this case has secured workers' compensation SHELTON, Lonnie 5

6 1 insurance coverage only for claims for injuries that either occur in Ohio or, for injuries that occur 2 outside of Ohio, are adjudicated in the Ohio workers' compensation system. By participating in 3 Ohio's mandatory insurance system, the Cleveland Cavaliers did not obtain workers' compensation 4 coverage for out-of-state injuries which are adjudicated out-of-state. The employer therefore has 5 not met its obligation to secure insurance either by obtaining a self-insurance certificate from the 6 Director of Industrial Relations or buying a workers' compensation policy from an insurer 7 authorized to do business in California. There is a prima facie case that the employer failed to 8 secure the payment of workers' compensation by the nonexistence of a valid certificate to self- 9 insure or a record with the Workers' Compensation Insurance Ratings Bureau indicating private 10 insurance coverage constitutes. (Labor Code section 3715(c).) 11 Further proof that OBWC is not authorized to write workers' compensation insurance in 12 California, is readily available from the Department of Insurance's web page, which posts 13 insurance company profiles stating whether a company is authorized to write workers' 14 compensation insurance in California. (See Starving Students, Inc. v. Department of Industrial 15 Relations (2005) 125 Cal. App. 4th 1357 [70 Cal.Comp.Cases 30] [Employer challenged 16 assessment of penalty for failure to secure the payment of compensation].) 17 The WCJ addressed the effect of OBWC's lack of authorization to insure the liabilities of 18 an Ohio employer in a forum outside Ohio, when he questioned the equity of OBWC accepting 19 premiums from Ohio employers but refusing to provide coverage if a claim is adjudicated outside 2 0 Ohio. "Now the situation where the person is injured out of the state and wishes to adjudicate it for 21' some reason outside of Ohio, and now even though the employer has paid this premium, it appears 22 they're going to be illegally uninsured because there has been a denial of coverage.." 231 An insurer is said to stand in the shoes of the employer, such that the employer may be 24 dismissed from the action. However, such transfer of liability can only occur where the insurer 25 accepts liability. Labor Code section 3755 provides: 26 "If the employer is insured against liability for compensation, and if 27ý after the suffering of any injury the insurer causes to be served upon any compensation claimant a notice that it has assumed and agreed to SHELTON, Lonnie 6

7 1 Ipay any compensation to the claimant for which the employer is liable, such employer shall be relieved from liability for 2 compensation to such claimant upon the filing of a copy of such notice with the appeals board. The insurer shall, without further 3 notice, be substituted in place of the employer in any proceeding theretofore or thereafter instituted by such claimant to recover such 4 compensation, and the employer shall be dismissed therefrom. 5 "Such proceedings shall not abate on account of such substitution but 6 shall be continued against such insurer." 7 Here, OBWC has not accepted liability to pay compensation awarded in an action 8 adjudicated before the Workers' Compensation Appeals Board in California. It is not authorized to 9 provide workers' compensation insurance in California. Therefore, the employer is this matter is 10 effectively uninsured. We shall grant reconsideration to amend the Findings and Award and Order 11 to reflect the absence of the insurer. 12 As for OBWC's claim that the Workers' Compensation Appeals Board lacks personal 13 jurisdiction, it is not necessary to reach this claim. However, though it may be moot, we offer the 14 following observations. 15I First, we note the WCJ's contention in his Report and Recommendation on Petition for 161 Reconsideration, that personal jurisdiction was obtained when counsel for OBWC made a "special 17 appearance" in his courtroom. The WCJ concluded that there is no authority to seek to avoid 18, jurisdiction through a "special appearance." However, this is not the law in California. A party may 19ý contest jurisdiction, personal, subject matter or both, through a "special appearance." (Janzen v. 20 Workers' Comp. Appeals Bd. (1997) 61 Cal. App. 4th 109 [63 Cal.Comp.Cases 9].) 21 Neither do we accept the WCJ's rationale that the OBWC had sufficient minimum contacts 22 with California through the acts of its insured Ohio employer. OBWC provides the payment of 23 compensation according to its statutory authority. All employers who obtain mandatory workers' 2 4' compensation coverage in Ohio have equal notice of the laws of Ohio. Therefore, we cannot state 251 that the employer did not have notice of the need to obtain additional insurance coverage for 2 6 injuries that are adjudicated outside of Ohio As noted above, Labor Code section 3755 provides that an insurer does not step into the SHELTON, Lonnie 7

8 1 shoes of its insured until the insurer accepts such liability. While it is a matter of course for 2 California insurers to substitute in for their insured, it does not follow that an out-of-state insurer 3 like OBWC, with no legal duty to defend its insured outside its own jurisdiction, would expect 4 jurisdiction to attach based solely upon the conduct of its insured. 5 Accordingly, we shall grant reconsideration to amend the Findings and Award and Order to 6 find defendant, Cleveland Cavaliers, failed to secure the payment of compensation, and to remove 7 defendant OBWC from liability for the award of benefits. 8 For the foregoing reasons, 9 IT IS ORDERED that the August 29, 2008 Petition for Reconsideration be, and hereby is, 10 GRANTED, and as our Decision After Reconsideration, the August 8, 2008 Findings and Award 11 and Order is AMENDED as follows: 12 FINDINGS OF FACT During this period of time, the Ohio Bureau of Workers' Compensation provided insurance 14 for employees of the Cleveland Cavaliers, for claims brought in the State of Ohio. The 15 Cleveland Cavaliers did not secure the payment of compensation as required by Labor 16 Code section AWARD 18 AWARD IS MADE in favor of applicant, LONNIE SHELTON and against 19 CAVALIERS HOLDINGS COMPANY, LLC, dba CLEVELAND CAVALIERS as follows: 20 a) The applicant sustained 86.75% permanent disability indemnity, payable in the dollar 21 amount of $72,135.00, beginning as of August 1, 1986, and thereafter a life pension at 22 $42.13/week, after apportionment. 23 b) The applicant is entitled to future medical care except for the small finger on his left hand 24 that does not need any future medical care. 25 c) The applicant's counsel is allowed a reasonable attorney's fee of 15% of the permanent 26 disability awarded, including 15% of the commuted value of the life pension, all of which 271 is to be commuted from the far end of the Award, if the commutation is necessary to not SHELTON, Lonnie 8

9 1 interrupt the payments being made to the applicant. 2 3 ORDER 4 IT IS HEREBY ORDERED THAT: 5 a) The applicant did sustain an industrial injury from June 1983 to 1986 to his low back, both 6 knees, both ankles, his left wrist, his right elbow and the small finger of his left hand. 7 b) This case is not barred by the Statute of Limitations. 8 III 9 III 10 III 11 III 12 II 13 I 14 I.15 Iff 16 1f1 17 f1f 18 1/ 21!l 21!1 22// 23,// 21 III 241II 25II 26II 27 // SHELTON, Lonnie 9

10 c) The medical report of Dr. Feiwell is excluded from evidence as the report was obtained by 2 the Cleveland Cavaliers after they already obtained their Qualified Medical Examiner's 3 report from Dr. Marinow. 4 5 WORKERS' COMPENSATION APPEALS BOARD 6 7 JAMES C. CUNEO 9 10o I CONCUR, E l R A E. L O W.. F 141LHA.LW 15ý / ALFONSO J. MORESI DATED AND FILED IN SAN FRANCISCO, CALIFORNIA 21 OCT SERVICE MADE BY MAIL ON ABOVE DATE ON THE PERSONS LISTED BELOW AT THEIR ADDRESSES AS SHOWN ON THE CURRENT OFFICIAL ADDRESS RECORD: 23 Lonnie Shelton Ron Mix 25 Griffin & Griffin Armstrong & Sigel 2 27 SE Vjp SHELTON, Lonnie 10

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