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Wal-Mart class action settlement raises liability questions

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Wal-Mart class action settlement raises liability questions

Settlement of a class action lawsuit alleging that Wal-Mart Stores Inc. went too far in controlling injured workers' treatment raises concerns because it challenges management practices in general, workers compensation observers say.

The settlement involving Wal-Mart's claims administration unit and Concentra Health Services Inc. in Colorado also is troubling since it is believed to be the first payout resulting from recent suits alleging that employers' and workers comp service providers' claims management practices violated the Racketeer Influenced and Corrupt Organizations Act, several observers say (see related story).

In winning the settlement of Josephine Gianzero et al. v. Wal-Mart Stores Inc., the 13,521 plaintiffs circumvented the exclusive remedy provision typical in state laws that limits employers' liability for injured employees to workers comp payments, observers said.

“It's definitely a crack in the exclusive remedy” defense and creates a road map for plaintiffs in other states, said a workers comp insurer who asked not to be identified.

But several experts on Colorado's workers compensation law expressed skepticism that Colorado plaintiffs would succeed if they used a similar strategy in new litigation.

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“I don't see the basis for a lawsuit like this springing up in other employment scenarios,” said Frank Cavanaugh, an associate at workers comp law firm Ruegsegger Simons Smith & Stern L.L.C. in Denver. “It was such a fact-specific problem that I don't see it becoming the basis for other lawsuits.”

Legal observers also note that an $8 million settlement given final approval Nov. 13 by U.S. District Court Judge Robert E. Blackburn may be too little to motivate filing similar lawsuits.

“The case settled for nuisance value with no admission (of wrongdoing), so I don't think there is a significant impact on future comp cases,” said Brett R. Parnes, a shareholder specializing in workers comp defense at McCollum, Crowley, Moschet, Miller & Laak Ltd. in Denver.

Still, the settlement is cause for concern because the allegations “go right to the heart of medical management,” a core function of claims administrators who must make sure that employers and insurers do not pay for wasteful or unnecessary medical care, said a source familiar with third-party administrator operations.

The source asked not to be identified because the case addresses “an extraordinarily sensitive issue” for TPAs.

Several TPAs declined to comment.

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The issue is sensitive because the lawsuit raises the question of how far claims administrators can pursue management of questionable medical treatments found through common practices, such as utilization reviews, without violating the law, the source said.

“We don't really know how this is going to work out, but you can bet everyone's attorney is poring over this one because it (raises) a key issue,” the source said. “We have to know exactly where we can go without going too far.”

In their 2009 suit, the plaintiffs alleged that Wal-Mart and other defendants dictated, restricted or interfered with medical treatment that injured workers are entitled to under Colorado's Workers' Compensation Act and in violation of RICO.

They alleged that while the state law “expressly prohibits dictation of medical treatment,” the defendants did so with instructions in protocol notes that treating doctors were required to follow in treating claimants.

The suit also alleged RICO violations for several practices that included collusion to dictate or withhold medical treatment and by scheming to conceal claimants' entitlement to workers comp benefits.

The protocol notes required treating physicians to obtain pre-authorization from Wal-Mart's claims management unit to refer claimants to specialists, resulting in treatment delays and denial of prescribed care, according to the suit.

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The suit named Wal-Mart's casualty claims management unit, Claims Management Inc.; Concentra; and American Home Assurance Co., a unit of American International Group Inc. that provided workers comp insurance to Wal-Mart in Colorado.

However, Wal-Mart and the other defendants admitted no wrongdoing in the settlement.

“The health, safety and well-being of our associates are important to Wal-Mart,” Wal-Mart said in a statement announcing the settlement. “If associates are injured at work, we and CMI are committed to making available the best treatment and care, so that they can get better. It is up to the doctors to determine the best course of treatment for each person.”

Of the $8 million, Wal-Mart will pay $4 million and Concentra's insurer, AIG-owned Lexington Insurance Co., will pay $4 million. Among other injunctive relief, Wal-Mart also has agreed to provide training for its adjusters.

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