JOSE AYON, Applicant
MID CITY FOUNDRY CO, Employer
WAUSAU UNDERWRITERS INS CO, Insurer
This case arises on the applicant's claim for bad faith or unreasonable delay in the payment of compensation, arising from a January 25, 2007 injury. The matter was heard by an administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development on May 13, 2008. By the date of the hearing, the employer and its insurer (collectively, the respondent) conceded jurisdictional facts, a compensable injury on or about January 5, 2007, and an average weekly wage of $642.03. At issue was the liability of the insurer for bad faith or unreasonable delay under Wis. Stat. §§ 102.18(1)(bp) and 102.22(1).
On May 29, 2008, the ALJ issued his decision finding an unreasonable delay, but not bad faith, on the part of the insurer, and awarded a ten percent penalty on the delayed payment of temporary disability, totaling $642.35. The applicant filed a timely petition for commission review.
The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:
The applicant began working for the employer in December 2004. He was a molder, and part of his job involved moving--mostly pushing but sometimes partially lifting--boxes of sand weighing up to 4,000 pounds. He described the work as heavy. In a statement he gave to the insurer's claims investigator, he added the detail that the boxes he pushed were on rollers. He also stated he pushed the boxes eight to ten feet, forty or more times per day.
On December 29, the applicant complained to his supervisor about elbow problems after working about 6 hours moving boxes weighing 3,000 pounds. The applicant had a sharp pain in his elbow every time he pushed a box. His elbow was swollen as well. There was evidently some talk of seeing a doctor, but the applicant did not see a doctor at that time.
His supervisor, R. Wisniewski, filed an accident report with this description:
No accident reported. Showed me his left elbow, seemed to have a bump or lump under the skin. No bruise visible. When asking him what happened didn't know that anything happened. Just noticed lump.
When the accident report was forwarded to the worker's compensation insurer, the following notation was added:
Please note: the supervisor does not believe that this should be covered by workman's compensation because it is unknown as to what caused the bump and when and where it happened.
The applicant saw a doctor on January 5, 2008, when he went to an emergency room. The attending doctor noted complaints of pain to the left elbow for the past week following an unknown injury at work, starting a day or two earlier. The doctor noted no direct trauma, but the development of symptoms of injury after straining and repetitive pushing. Some swelling at the posterior right elbow was noted.
The applicant saw his family doctor, Javier Rincon, M.D., on January 9, 2007. Dr. Rincon reported the applicant had had an injury on January 2 where he injured his left elbow which was sore, tender and swollen. The doctor noted large bruising with some erythema. His diagnosis was left elbow bursitis with ecchymosis and cellulitis. The doctor prescribed Naproxen, an anti-inflammatory, and Kelfex, an antibiotic.
The applicant gave a statement to the insurer on January 24, 2007, reporting that elbow pain he had had for some time had gotten bad at work on December 28, 2007. He denied the occurrence of any specific injury, such as banging the elbow on something or moving something that started the pain. He told his supervisor the pain had gotten bad and he had to go to the clinic.
When the applicant returned to Dr. Rincon on January 30, 2007, the swelling persisted and Dr. Rincon referred the applicant to a surgeon to aspirate the elbow.
Accordingly, the applicant saw Kenneth L. Schaufelberger, M.D., on February 1, 2007, who noted an injury about a month earlier at work while pushing molds into place. The doctor reported the applicant had gone to the emergency room, where he was told he had been lifting too much, and that he had been treated with antibiotics. The doctor offered a diagnosis of 58-year old male with subacute traumatic left olecranon bursitis, which he offered to treat with a compression dressing.
When the applicant saw Dr. Schaufelberger again on February 19, 2007, he noted the applicant was improving with conservative therapies. He lessened and modified the applicant's work restrictions, and provided him with a copy of his note for the prior visit which "states this is a work related injury." Dr. Schaufelberger referred the applicant for physical therapy.
The next day, on February 20, 2007, the insurer sent the applicant a letter informing him it was denying his worker's compensation claim, stating:
The results of our investigation do not reveal that your condition is a direct result of a work-related injury.
After a visit in March 2007, Dr. Schaufelberger released the applicant to work with a restriction against lifting more than 20 pounds. He noted at this time:
Mr. Ayon is a 58-year old male with resolved olecranon bursitis. He continues to have some pain at the promixal olecranon which is likely unrelated to his work injury.
On April 6, 2007, the applicant filed an application for hearing.
Dr. Schaufelberger saw the applicant in clinic on April 23, 2007, and noted that the applicant had been off work since December, and had been discharged from physical therapy since his worker's compensation claim had been denied. The doctor's assessment was
A 58-year old male with left olecranon bursitis and lateral epicondylitis which has improved with conservative therapies and rest. Although his worker's compensation claim was denied ..., I feel strongly that this is a worker's compensation injury. The inflammation of the olecranon bursa and tendinosis of the lateral epicondyle falls in the category of a cumulative trauma disorder (CTD). This is widely accepted in the upper extremity literature as due to an overuse injury which often happens in this type of occupation. I have recommended to him that he appeal Wausau Insurance's decision and/or contact a lawyer. I would be more than happy dictate a letter in his behalf as there are many papers in the literature that would support his position. I have spoken with Claudetta Wright, the Human Resources Manager at Mid City and will dictate a separate letter to her answering some questions they have for a Family Medical Leave Act. He was provided with a work release that he may return to work on April 24, without restrictions.
Indeed, on April 23, 2007, Dr. Schaufelberger wrote to the employer, responding to a conversation the doctor and the employer's representative had had earlier. The letter stated the applicant had been under the doctor's care for lateral epicondylitis, olecranon bursitis, that he had completed physical therapy with a home exercise program and been discharged from therapy, and that he had been released to work without restrictions.
At some point, either after Dr. Schaufelberger's note in late April 2007, or possibly a month earlier at the end of March 2007 (transcript, page 26), the applicant returned to work.
On May 8, 2007, the respondent filed an answer generally denying the applicant's claim. Several months later, on October 11, 2007, the worker's compensation insurer scheduled a medical examination for the following month.
Meanwhile, on October 29, 2007, the applicant saw Brian A. McCarty, a colleague of Dr. Schaufelberger's. Dr. McCarty noted the applicant's olecranon bursitis had completely healed, but the applicant still got discomfort at the lateral epicondyle with any type of gripping or heavy lifting. He noted the applicant was scheduled to see an independent medical examiner, and that he (McCarty) would recommend a possible cortisone shot after that appointment.
The examiner retained by the respondent is Mark Aschliman, M.D., and his November 12, 2007 report is at exhibit A. He diagnosed left lateral epicondylitis, and noted
...his job duties as he has described them today are consistent with those that likely have contributed to the development of lateral epicondylitis. He does a great deal of heavy grasping, lifting, and pushing. Over time he likely developed some lateral epicondylitis as a result of this activity. He may have also developed a traumatic olecranon bursitis in January of 2007 with some associated lateral epicondylitis. He was appropriately treated. He recovered fully from the effects of and results of his January 5, 2007 claim by the time of his discharge from care by Dr. Schaufelbeger on April 23, 2007....
Dr. Aschliman added that, long term, the applicant probably was not well suited for continuing performance of repetitive heavy pushing and grasping activities.
Addressing the question of what caused the injury in a specific interrogatory, Dr. Aschliman stated:
Symptoms in January of 2005 did not represent the effects and results of a specific workplace incident. This is documented in the initial record. Rather, Mr. Ayon likely developed some elbow discomfort as a result of repetitive heavy lifting, grasping, pushing, and pulling activities. This does represent a condition that occurred as a result of general workplace activities.
After this, in December 2007, the applicant received a check for temporary disability compensation from the worker's compensation insurer. In all, he and his attorney were paid $6,423.45. Transcript, page 101. The insurer also paid the applicant's medical expenses at that point.
The insurer's worker's compensation team manager, Virginia Rheinschmidt, testified about the handling of the applicant's claim. Her testimony is based in large part on her review of the electronic claim file maintained by the insurer; she supervised the adjusters who handled his claim. Ms. Rheinschmidt testified that the insurer denied the applicant's claim initially because he had been inconsistent about exactly when and how the injury happened.
The applicant now claims bad faith on the part of the worker's compensation insurer in its handling of the applicant's claim. Bad faith claims are governed by Wis. Stat. § 102.18(1)(bp)(1) which provides:
102.18(1)(bp) If the department determines that the employer or insurance carrier suspended, terminated, or failed to make payments or failed to report an injury as a result of malice or bad faith, the department may include a penalty in an award to an employee for each event or occurrence of malice or bad faith. This penalty is the exclusive remedy against an employer or insurance carrier for malice or bad faith. If this penalty is imposed for an event or occurrence of malice or bad faith that causes a payment that is due an injured employee to be delayed in violation of s. 102.22 (1) or overdue in violation of s. 628.46 (1), the department may not also order an increased payment under s. 102.22 (1) or the payment of interest under s. 628.46 (1). The department may award an amount that it considers just, not to exceed the lesser of 200 percent of total compensation due or $30,000 for each event or occurrence of malice or bad faith. The department may assess the penalty against the employer, the insurance carrier or both. Neither the employer nor the insurance carrier is liable to reimburse the other for the penalty amount. The department may, by rule, define actions which demonstrate malice or bad faith.109
In addition, the department has also promulgated a rule which provides in relevant part:
DWD 80.70 Malice or bad faith.
(2) An insurance company or self-insured employer who, without credible evidence which demonstrates that the claim for the payments is fairly debatable, unreasonably fails to make payment of compensation or reasonable and necessary medical expenses, or after having commenced those payments, unreasonably suspends or terminates them, shall be deemed to have acted with malice or in bad faith.
The court of appeals has previously discussed the interplay between the "inexcusable delay" penalty under Wis. Stat. § 102.22(1), and the "bad faith" penalty under Wis. Stat. § 102.18(1)(bp):
Chapter 102 contemplates three types of conduct stemming from a delay in payments: (1) excusable delay; (2) inexcusable delay, though not in bad faith; and (3) bad faith delay.
Section 102.22(1), Stats., provides that "[w]here the employer or his or her insurer is guilty of inexcusable delay in making payments, the payments as to which the delay is found shall be increased by 10 percent." (Emphasis added.) The fact that only "inexcusable" delay is subject to the 10 percent penalty indicates that the legislature contemplated that some delay could be excusable. See Coleman v. American Universal Ins. Co., 86 Wis. 2d 615, 625-26, 273 N.W.2d 220, 224 (1979).
The potential 200 percent penalty of sec. 102.18(1)(bp), Stats., is reserved only for cases where the employer or insurer acted in "bad faith." Thus, the legislature contemplated that there could be a delay in payment that, while inexcusable, did not rise to the level of "bad faith." We conclude that a finding of the "knowledge" element of the Anderson test is a prerequisite to imposition of "bad faith" penalties under sec. 102.18(1)(bp), Stats....
LIRC should determine first if there was a reasonable basis for delay. See Anderson, 85 Wis. 2d at 691, 271 N.W.2d at 376. If LIRC concludes there was not a reasonable basis for the delay, it should next determine whether the employer had knowledge of the lack of a reasonable basis for delaying payments or if there was a reckless disregard of the lack of a reasonable basis. See Id. If LIRC determines from the record, after finding no reasonable basis for the delay, that the "knowledge" element is satisfied, it may then conclude that the employer's delay of payments was in bad faith.
North American Mechanical, Inc. v. LIRC, 157 Wis. 2d 801, 808-10 (Ct. App. 1990).
The supreme court cited the North American Mechanical holding with approval in Brown v. LIRC, 2003 WI 142, ¶27, 267 Wis. 2d 31, 671 N.W.2d 279. Emphasizing that the knowledge element is a prerequisite to the imposition of the bad faith penalty, the supreme court reiterated that the legislature contemplated that some delay could be excusable and that not all inexcusable delays rise to the level of bad faith. Brown v. LIRC, 267 Wis.2d 31, ¶28. Summarizing the bad faith statute, Wis. Stat. § 102.18(1)(bp), the supreme court stated:
¶17 Section 102.18(1)(bp) provides, in relevant part, that the Department of Workforce Development (DWD) may include a penalty in an award to an employee if the department determines that "the employer's or insurance carrier's . . . failure to make payments . . . resulted from malice or bad faith." Wis. Stat. § 102.18(1)(bp). A claimant seeking to impose penalties for bad faith failure to make payments under § 102.18(1)(bp) must prove two elements: 1) the employer or insurer did not have a reasonable basis for denying benefits; and 2) the employer or insurer knew it lacked a reasonable basis for denying benefits or recklessly disregarded a lack of a reasonable basis for denying payment. [Citation omitted.]
Bosco v. LIRC, 2004 WI 77, ¶17, 272 Wis. 2d 586.
In this case, the ALJ paid only the 10 percent inexcusable delay penalty on the delayed temporary disability. His decision indicates he did not award the higher bad faith penalty because the applicant's treatment notes were not clear about how he hurt himself or when, and because Dr. Schaufelberger's March 26, 2007 note confused the matter by indicating that the continuing pain the applicant was having at that time was likely not work related.
However, the commission is persuaded that there was no reasonable basis for the delay in the payment of the applicant's compensation and that the insurer acted in reckless disregard of the lack of a reasonable basis for delaying the payments. During treatment, the applicant's doctors ascribed the applicant's problems to work, and the applicant's descriptions of the job duties--which the worker's compensation insurer does not dispute--are consistent with an elbow injury from a lay view. Nor are applicant's descriptions of the injury--when and how he experienced the onset of pain--really all that inconsistent with a claim of injury from occupational exposure over time.
Further, the insurer denied the claim on February 20, 2007 before it obtained an opinion from a medical examiner. Its denial seems to be based almost entirely on the fact that this was not an accidental injury case, and the unwillingness to acknowledge the possibility of an occupational disease claim. Further, while Dr. Schaufelberger might not have felt the applicant's continuing elbow pain after March 27, 2007 was work related, he clearly was of the opinion that the prior symptoms were work related, an opinion he reiterated at least twice in his medical notes, and forcefully in his April 23, 2007 note. He notes relaying that opinion to the employer's representative, Ms. Wright. Yet the insurer waited almost 6 months after that to schedule an appointment with its own medical examiner.
On this record, the commission is persuaded that a bad faith penalty set at 100 percent of the amount of the temporary disability delayed, or $6,423.45, is appropriate. However, while the insurer acted with reckless disregard of the lack of a reasonable basis for delaying the payment, its conduct was not sufficiently egregious to warrant imposition of the maximum 200 percent penalty, nor does it warrant imposition of a penalty on the delayed medical expense.
NOW, THEREFORE, the Labor and Industry Review Commission makes this
The findings and order of the administrative law judge are modified to conform to the foregoing and, as modified, are affirmed in part and reversed in part.
Within 30 days of the date of this order, the employer and its insurer shall pay all of the following:
1. To the applicant, Jose Ayon, the sum of Five thousand twenty-one dollars and thirty-four cents ($5,021.34) in penalty under Wis. Stat. § 102.18(1)(bp).
2. To the applicant's attorney, Israel Ramon, the sum of One thousand two hundred eighty-four dollars and sixty-nine cents ($1,284.69) in fees and One hundred seventeen dollars and forty-two cents ($117.42) in costs.
Dated and mailed December 29, 2008
ayonjos : 101 : 1
ND §§ 7.21, 7.22
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
The commission did not discuss witness credibility and demeanor with the presiding ALJ because its modification of his decision was not based on a different assessment of witness credibility, but upon reaching a different legal conclusion upon applying the facts to the legal standards applicable to unreasonable delay and bad faith in worker's compensation cases.
cc:
Attorney Israel Ramon
Attorney Laura Salerno
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