SUSAN M. CARLSON-NICKS, Applicant
GENERAL MOTORS CORPORATION, Employer
GENERAL MOTORS CORPORATION, Insurer
This matter arises on the applicant's claim for compensation for bad faith delay or denial in payment. An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development heard the matter on September 29, 2009, with a close of record with the submission of briefs on October 30, 2009. The ALJ issued her decision on November 20, 2009, which awarded nearly $73,000 in compensation for delay in payment under Wis. Stat. § 102.22 and bad faith under Wis. Stat. § 102.18(1)(bp). The self-insured employer filed a timely petition for 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 was born in 1961. She thus was 47 when she hurt her left shoulder at work on June 9, 2008. She underwent arthroscopic surgery performed by Dr. Pittenger on September 5, 2008. Dr. Pittenger gave her an unrestricted release to work as of December 22, 2008. However, he also stated he would see her for a final impairment rating in "9 to 12 months post op."
The applicant did not return to work, despite her release, because the plant where she worked in Janesville closed on December 23, 2009. As of the week ending December 28, 2008, the employer began paying the applicant $646.15 per week under a "special attrition" pre-retirement program. The program was apparently designed to get younger workers like the applicant to age 50, when they could begin to receive a standard retirement benefit.
In January 2009, the employer's medical examiner, James Self, M.D., issued a report stating that the applicant did, in fact, suffer a rotator cuff tear from a work event on June 9, 2008, that she had not yet reached a plateau of healing, but that she likely would by June 2009. In the interim, Dr. Self thought she would likely see symptomatic and functional improvement. He declined to rate permanent disability at that point.
In February 2009, the parties signed a stipulation agreeing that the applicant sustained a compensable injury on June 9, 2008, that the average weekly wage was the maximum, that a surgery done on September 5, 2008, was reasonable and necessary to cure and relieve the effects of the work injury, and that the applicant was in a healing period and remained under temporary restrictions and was projected to do so until June 2009.
On April 8, 2009, the employer paid temporary disability for the period from September 5 to December 20, 2008, in the amount of $4,416.78. The applicant also claimed temporary disability from December 20, 2008 to June 18, 2009, in the amount of $6,278. That amount was not paid as of the date of the hearing. By letter dated June 18, 2009, the treating surgeon rated permanent partial disability at five percent at the shoulder, or 25 weeks at $272 per week, totaling $6,800. That amount was paid after the hearing.
At the hearing, the applicant sought a bad faith penalty as follows:
The bad faith statute, Wis. Stat. § 102.18(1)(bp) 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.
The administrative rule defining bad faith, as mentioned in the statute, provides:
DWD 80.70 (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.
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.
The commission has also addressed the question of multiple bad faith awards on the continuing failure to pay the same amounts. The commission has previously held that while a second bad faith award may be appropriate where the department issues a bad faith award and the employer refuses to pay that, it is not appropriate to make multiple awards based on a continuing failure to pay absent such an intervening bad faith award. See Regina Leach v. Prent Corp., WC claim no. 2005-027936 (LIRC, April 20, 2010).(1)
The commission begins by noting that it may not award both the bad faith penalty under Wis. Stat. § 102.18(1)(bp) and the inexcusable delay penalty under Wis. Stat. § 102.22(1) based on the same alleged acts of bad faith. Language forbidding payments under both statutes was added to Wis. Stat. § 102.18(1)(bp) by 2005 Wis. Act. 172, which applies to acts of bad faith occurring after April 1, 2006. All the acts of bad faith in this case occurred after April 1, 2006.
The commission also declines to award two separate penalties based on the failure to pay the first period of temporary disability accruing from September 5 to December 20, 2008 because it was not paid (1) immediately, and (2) after the February 2009 stipulation. First, in the order approving the stipulation in February 2009, the department specifically found a valid dispute existed. Second, as discussed above, the commission has held in Leach that multiple awards on a continuing failure to pay, absent an intervening unpaid bad faith award, are not supported by the statute. A lengthy delay--or a failure to pay at various points when a demand for payment is made--may reasonably be viewed as a factor in going to the maximum 200 percent award. But it does not by itself constitute discrete events or occurrences of nonpayment justifying the compounding or multiplication of penalties.
Regarding this first period of temporary disability liability (September 5 to December 20, 2008), the self-insured employer's witness, Jerry Williams, testified at the hearing that the employer did not begin to pay the applicant's claim immediately in part because the applicant had been inconsistent in how she reported the accident. Of course, that impediment would have been eliminated in January with Dr. Self's report, or by February 2009, when the employer stipulated that the applicant in fact had been injured and was temporarily disabled.
Thus, when the employer entered into the stipulation in February 2009, the fact of a work injury causing substantial disability and the need for surgery was no longer fairly debatable and, other things being equal, the self-insured employer had to make the payments at the risk of acting in bad faith. See Wis. Admin. Code § DWD § 80.70. Yet the employer still did not pay the first period of temporary disability until April 8, 2009.
The employer seems to explain the delay as being due to its financial problems. While Mr. Williams testified the employer did not actually enter into bankruptcy until July 1, 2009, he testified that the employer had already begun asking the U.S. Congress for loans and was not master of its own affairs. The commission is not convinced. Certainly, there is nothing in the record indicating the employer put the wheels of payment of the applicant's claim in motion immediately at the time of the stipulation in February 2009. There are no letters to a trustee in bankruptcy, or whoever the equivalent official was, seeking permission to pay. Nor does the record contain any order from a bankruptcy court, or other court, prohibiting payment of worker's compensation claims against the employer. There are no letters to the Wisconsin Department of Workforce Development or to the employee explaining the delay as being due to the employer's insolvency. The employer has not responded to the applicant's attorney's point that a self-insured employer must post bonds, letters of credit, or other documents, presumably so they may be drawn upon when the employer is in financial difficulty. Wis. Admin. Code § DWD 80.60. The commission is not persuaded that the self-insured employer has shown it was actually unable to pay the applicant's claim at any point in time, nor has it shown any other reasonable basis for its failure to pay the compensation when due.
Regarding the second period of temporary disability, the period December 20, 2008 to June 18, 2009, the commission again declines to make two separate awards for bad faith based on the failure to pay the compensation (1) when it accrued and (2) on demand at the hearing, for the reasons set out above. Nonetheless, the commission concludes the employer acted in bad faith with respect to this period as well. At the hearing, Mr. Williams explained that the employer did not pay the temporary disability from December 20, 2008 to June 18, 2009 because even if the applicant had not been hurt, she would not have been actually working at her full wage for the employer by then. Because of the Janesville plant closure the employer would have only been paying the applicant, regardless of her injury, the lower special attrition/preretirement payments. However, as discussed at the hearing, by statute, a worker's temporary disability rate is based on a worker's average weekly wage when injured, not on an expected wage rate in the future. See Wis. Stat. § 102.11. In this case, the applicant's average weekly wage at the time of her injury was the statutory maximum--the employer stipulated to that amount. Her temporary disability must be paid based on that rate, less statutory offsets.
On appeal, the employer's attorney raises the Hoff v. General Motors cases(2) which generally hold that when a retired worker is no longer attached to the labor market, an employer may avoid temporary disability. However, while temporary disability must be based on a theoretical wage loss and must bear some resemblance to the loss sustained, Employers Mut. L. Ins. Co. v. Industrial Commission, 230 Wis. 270, 281 (1939), the applicant in this case was a 47-year old worker who was effectively being laid off for economic reasons. She was not "retiring" in the sense of removing herself from the labor market. Further, the testimony of the employer's witness, Mr. Williams, does not indicate the employer was really relying on the Hoff cases, or a removal from the labor market theory, in denying her temporary disability compensation. In fact, the record indicates she returned to work for another employer (see exhibit A), and the applicant has accounted for these earnings in her calculation of the temporary partial disability due for the period at issue.
The self-insured employer responded that the applicant did not tell it about these wages with another employer. That argument might have had some persuasive force if the employer had been actually meeting its statutory obligation by paying temporary partial disability during this period, so that the earned wages would affect the employer's calculation of its liability under Wis. Stat. § 102.43. But the employer was not paying temporary disability and continued to insist it owed none to the date of hearing. Under these facts, whether or not the applicant kept the employer informed of her employment status does not establish that the employer denied her compensation on the reasonable belief she had withdrawn from the labor market.
The employer also seems to contend its delay in paying permanent partial disability should be excused because it finally paid the permanent partial disability in October 2009, after the hearing, and because the full 25 weeks of permanent partial disability had not fully accrued as of the date of the hearing. However, the permanent partial disability liability became certain on June 18, 2009 with Dr. Pittenger's five percent rating. Under Wis. Stat. § 102.32(6)(c), the employer had to begin making payments within 30 days of receipt of the doctor's report; it did not and it offers no reasonable explanation for its failure.
In short, the commission concludes that under the facts of this case, the
employer acted in, at the very least, a reckless disregard of its lack of a
reasonable basis for denying and delaying payment of the disability compensation
due to the applicant. The sum of compensation owed for the two periods of
temporary disability and the accrued period of permanent disability ($4,416.78
plus $6,278 plus $5,168(3)) is $15,862.78. Regardless of whether denial or delay of compensation for the two periods of temporary disability and the accrued permanent disability may be viewed as separate events or occurrences to which separate $30,000 maximums apply, the commission concludes a $30,000 award is warranted in this case.
The applicant's award is subject to the direct payment of an attorney fee, set under Wis. Stat. § 102.26 at twenty percent of the amount awarded, or $6,000. That amount, plus costs of $17.69 shall be deducted from the applicant's award and paid directly to the applicant's attorney within 30 days. The remainder, $23,982.31, shall be paid to the applicant within 30 days.
This order applies only to the award for bad faith based on nonpayment or delayed payment of the disability compensation as set out above. This order shall be left interlocutory to permit further orders and awards on any other issues involving the applicant's injury.
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, the self-insured employer shall pay all of the following:
1. To the applicant, Susan Carlson-Nicks, Twenty-three thousand nine hundred eighty-two dollars and thirty-one cents ($23,982.31) in compensation under Wis. Stat. § 102.18(1)(bp).
2. To the applicant's attorney, James A. Meier, the sum of Six thousand dollars ($6,000) in fees and Seventeen dollars and sixty-nine cents ($17.69) in costs.
Jurisdiction is reserved for further orders and awards as are warranted and consistent with this decision.
Dated and mailed June 30, 2010
carlsos . wrr : 101 : 1
ND
� 7.21
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
The commission did not reverse the ALJ's decision on the basis of a different impression of the credibility of hearing witnesses, but rather based on a different determination of the appropriate penalty amount on essentially the same set of facts as found by the ALJ.
cc:
Attorney James A. Meier
Attorney Emily C. Dawkins
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